Effectiveness of reputation in contracting for customized production: Evidence from online labor markets

Mingfeng Lin, Yong Liu, Siva Viswanathan

Research output: Contribution to journalArticlepeer-review

61 Scopus citations


This study examines the effects of reputation in the nascent but rapidly growing online labor markets. In these markets, contract winners (vendors) provide clients with customized products such as computer software, business plans, and artistic designs. The products are used primarily for business purposes and require time for production after project-specific contracts are awarded. These characteristics render it unclear whether online reputation will have similar effects as in online retailing, where finished and standardized products are sold for consumption. We analyze field transaction data from a major online labor market. The analyses using matched contract samples and vendor panels consistently show that despite the governing power provided by contracts as well as the litigation and arbitration options, vendors' online reputation can still be influential on clients. Vendors who have no reputation ratings are less likely to be chosen, and those with higher ratings are more likely to win subsequent bids. Importantly, however, such influences depend on the contract form that is used for a particular transaction-they are significant in output-based contracts but nonsignificant in input-based contracts. Besides extending the research on online reputation to the markets of customized production, this study shows contract form as an important boundary condition for the effectiveness of reputational information. It also provides direct managerial implications for electronic commerce in general and online labor markets in particular.

Original languageEnglish (US)
Pages (from-to)345-359
Number of pages15
JournalManagement Science
Issue number1
StatePublished - Jan 2018


  • Business services
  • Contracts
  • Entrepreneurship
  • Online labor market
  • Online reputation mechanisms
  • Word of mouth

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research


Dive into the research topics of 'Effectiveness of reputation in contracting for customized production: Evidence from online labor markets'. Together they form a unique fingerprint.

Cite this